Bridging Sustainability and Growth: How Carbon Finance Fuels Both Quantity and Quality in Green Innovation Within the Manufacturing Sector

Abstract

Against the backdrop of global low-carbon transformation, carbon finance plays an increasingly pivotal role in advancing green innovation (GI) and industrial upgrading. Drawing on data from manufacturing enterprises listed on China’s A-share market between 2009 and 2023, this study innovatively constructs an enterprise-level carbon finance (CF) index. The research indicates that: (1) CF has been found to significantly promote corporate green innovation, exhibiting a positive effect on both the quantity (Gqua) and quality (Gqli). Theoretical derivations indicate that, during the initial entry of firms into the carbon market, CF can directly incentivize firms to increase their optimal proportion of green innovation. In the market adaptation phase, CF strengthens green research and development investment by alleviating firms’ financing constraints, and this effect is amplified as the CF application increases. (2) The mediating test indicates that CF enhances both the quantity and quality of green innovation by alleviating the problem of digital knowledge-based faultlines in executives and information asymmetry. (3) The moderation analysis shows that both financing constraints and market concentration negatively moderate the relationship between CF and green innovation. (4) The heterogeneity analysis indicates that the positive effects of CF are more pronounced among highly polluting and high-technology firms. These findings provide valuable theoretical and policy insights for promoting the green transformation of the manufacturing sector.